Why the ASEAN Economic Community Will Struggle

Serious weaknesses within ASEAN threaten the realization of the bloc’s regional project.

By Ji Xianbai for The Diplomat

September 24, 2014

The recently released U.S. Chamber of Commerce ASEAN Business Outlook Survey 2015 highlighted the widespread concern that the much-anticipated ASEAN Economic Community (AEC) would not be launched by the end-2015 deadline. Indeed, most respondents were pessimistic about the inauguration of the AEC by 2020 or later. This is not the first time that AEC faces a probable delay: In 2012, the commencement of the AEC was postponed to December 31, 2015 from the original plan of January 1, 2015. Despite ASEAN Secretary-General Surin Pitsuwan’s firm reassurance that “[t]here will be no more delays and that all ten ASEAN countries will participate,” even the most fervent proponents of AEC are beginning to worry about the increasingly diminishing chance of delivering AEC on time as 2015 closes in.

ASEAN Economic Community

AEC originates from the ASEAN Vision 2020, which was adopted in 1997 on the 30th anniversary of ASEAN. It aspires to create a single market and production base with a free flow of goods, services, investments, capital and skilled labor by 2020. In 2003, ASEAN leaders signed the Declaration of ASEAN Concord II and agreed to establish the AEC by 2020. The 2007 Cebu Declaration accelerated the establishment of the AEC to 2015, and ASEAN introduced the AEC Blueprint, which was substantiated into the Roadmap for the ASEAN Community (2009-2015) two years later, to guide the implementation of the AEC.

To track the progress of the AEC, the AEC Scorecard, a compliance tool developed based on the EU Internal Market Scorecard, was adopted by ASEAN. To date, two official scorecards have been published, one in 2010 and the other in 2012. According to the AEC Scorecard 2012, the implementation rates of AEC’s four primary objectives: (a) single market and production base; (b) competitive economic region; (c) equitable economic development; and (d) integration into the global economy were 65.9 percent, 67.9 percent, 66.7 percent, and 85.7 percent, respectively, with 187 out of 277 measures being fully implemented by 2011. The formation of AEC appeared to be on track, which makes it all the more intriguing that so few people expect it to come into force even by 2020.

A Frail Locomotive

On the surface, the skepticism seems understandable – after all, it took the Europeans almost half a century to construct their European Community in the remarkable European integration process. Indeed, some critics point out that many of the specified deadlines of AEC implementation have been missed and some major initiatives have not taken off the ground. For example, only 50 percent of the ASEAN Master Plan on Connectivity has been realized due to a combination of financing shortfalls, poor governance, corruption, and the inability of national governments to manage international and interdepartmental coordination. However, ad hoc failures in implementing certain specific AEC targets are not the biggest concern; rather, it is the structural incapacity of the ASEAN to pull the AEC along.

If the AEC were a train, then the ASEAN Secretariat would be the locomotive. Yet, the ASEAN Secretariat itself lacks the financial and intellectual resources to act in that capacity. Astonishingly, the resources at its disposal have remained unchanged for 15 years, even though the region’s GDP had more than quadrupled. In 2013, the ASEAN Secretariat’s total budget was $16 million, a trifling amount for an institution growing in prominence with an ever expanding mandate and activities. In contrast, the European Commission was operating with a budget for its own administration of approximately $4.3 billion in 2012, and European governments spent many times that figure to launch their own regional project.

Not surprisingly, the ASEAN Secretariat is significantly understaffed. As of 2012, the ASEAN Secretariat employed about 300 people, while the European Commission employed roughly 34,000. Given budget constraints, a typical entry-level ASEAN headquarters professional is paid approximately $3000 per month – and this after major improvements in the remuneration package in recent years. Thus, the ASEAN Secretariat struggles to recruit well-educated staff from countries like Singapore and Brunei, or to compete with other regional organizations, such as the Asian Development Bank, which offers the brightest brains in the region a minimum annual wage of $74,100.

The AEC could perhaps still be achieved if the ASEAN member states (AMSs) were genuinely united in striving for the common good, not least the benefits derived from the envisaged economies of scale as a result of a Southeast Asian single market. Unfortunately, delays in delivering AEC reflect one of the most daunting challenges facing ASEAN: the AMSs’ inability or unwillingness to see themselves as a true single market. For example, Indonesia has refrained from ratifying the ASEAN Multilateral Agreement for Full Liberalization of Air Freight Services (MAFLAFS), to protect its domestic aviation industry from regional competitors, primarily from Singapore, Malaysia and Thailand. Without the participation of Indonesia, the single aviation market exists in name only and there is certainly no “open sky” above ASEAN territory. Other examples abound. Apparently, more often than not, narrower national interests trump a broader regional vision, while short-term thinking outweighs long-term benefits. Worse, it seems that the entrenched “ASEAN Way” of non-interference in domestic affairs in politics risks being translated and relegated to non-recognition of mutual interest in economics. In the absence of strong regional institutions and sanction mechanisms for non-compliance and non-cooperation, only peer pressure incentivizes AMSs to respect community commitments.

Last but not least, the slow progress and the obstacles encountered in implementing the AEC is an inevitable result of the generalized awareness deficit of ASEAN and AEC across the region – citizens in Southeast Asia know very little about ASEAN. An ASEAN Secretariat survey in 2013 found that three out of four ASEAN citizens lack even a basic understanding of ASEAN. Again, ASEAN can learn from the European experience in promoting public awareness about the European Union (EU). To enable EU citizens who are directly affected by EU legislation to understand the decisions that have been made in Brussels, translations of EU legislation into all 24 official languages and dissemination by national authorities are required before the new laws come into force. Regardless of their language, citizens of the EU at least know what their leaders are doing.

For ASEAN, the only working language is English, a language that is not cognate with any of the other languages in the region. The adoption of English has been hailed by some as “ASEAN’s Best Policy”; however, the very low English proficiency in the region makes it very hard for ordinary ASEAN citizens to follow regional agendas, which are often available in English only. Admittedly, copying the EU approach will take time, cost money, and entail complex regional and historical differences, but raising ASEAN awareness with the more effective use of communication channels would be conducive to the establishment of the AEC. By informing ASEAN citizens about the enormous economic potential the AEC is capable of unleashing, domestic lobbying pressure and public scrutiny would surge to pressure AMS governments to keep their promises and honor their pledge to build the AEC by 2015. In addition, greater public understanding of the AEC would encourage more people to take advantage of what after all would be a vibrant single market encompassing a GDP of $2.3 trillion and 600 million people.

If the AEC is to launch on schedule, it will certainly need a more powerful ASEAN Secretariat. It will also require all ten member states to abandon parochial obsessions in favor of shared prosperity.

Ji Xianbai is PhD candidate at S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University, Singapore on the prestigious Nanyang President’s Graduate Scholarship (NPGS). He is also Associate Fellow at European Union Centre in Singapore.